Chinese court applies US Law in straight bill of lading case

During the Thirteenth National Seminar on Maritime Adjudication held in September 2004, the judges

of China's maritime courts and appeal courts reached a common understanding on whether the carrier

under a straight bill of lading (B/L) should deliver the cargo only against production of the original B/L.

Their conclusion was that the carrier is obliged to deliver cargo under a straight B/L against surrender

of the original of the same. The carrier has the obligation to take back the original straight B/L after he

delivers the cargo to the consignee named on the bill (see our Legal Circular of September 2004).

However, such a common understanding is limited to cases where Chinese law is the applicable law. In

a recent case in Guangzhou, in which this law firm represented the carrier in defense of a claim from

the shipper, the court applied US law to hold that the carrier can deliver the cargo without production of

the original straight B/L.

In this case, the carrier issued to the Chinese shipper a straight B/L, where the applicable law clause

on the back of the B/L stipulated that the B/L shall be subject to the United States Carriage of Goods by

Sea Act 1936 (hereinafter referred to as "US COGSA"). After the cargo involved arrived at the

destination port in Canada, it was received by the consignee but without production of the original B/L.

When the shipper did not receive payment from the consignee, it brought an action in tort before the

Guangzhou Maritime Court against the carrier, requesting the latter to indemnify its losses. Both the

Guangzhou Maritime Court in first instance and the Higher People's Court of Guangdong Province in

second instance rejected such request and unanimously confirmed the legal principle as follows:

(a) A dispute over delivery of cargo without production of the original B/L shall be defined as a

contractual dispute. Therefore, the carrier's responsibilities and obligations in such kind of

dispute shall be determined by the law applicable to this particular case. For this reason, the

court did not support the shipper's attempt to file the suit in tort rather than in contract so as

to avoid the applicable law clause in the B/L.

(b) In respect of the effectiveness of the U.S. applicable law clause specified on the B/L in

question, the B/L is used by the parties voluntarily and thus the choice of the U.S. law shall

be deemed as both parties' genuine intention. In addition, such a clause does not violate the

public interest or the social order of the People's Republic of China. Therefore, although the

law of the United States does not have close connection with the case, such applicable law

clause shall still be lawful and effective.

(c) As for the proof of US law, the US COGSA and the Federal Bills of Lading Act have both

been ascertained in several effective civil judgments rendered by Chinese courts, therefore

the provision of relevant texts of the laws and relevant effective civil judgments would suffice

for the purpose of the carrier's proof of the US law, and no other means of proof would be

necessary for the carrier.

Under US law, the carrier is discharged from liability for delivery of cargo without production of the

original straight B/L. Pursuant to the US COGSA and the Federal Bills of Lading Act, when the carrier

delivers the cargo to the consignee named on the straight B/L, the carrier is not obliged to request the

consignee to produce or deliver the original straight B/L.